Pressure pumps up expansion in £16.7m takeover
The Sheffield-based engineering firm plans to expand Rotherham-based Roota, which it described as an excellent fit with its Al-Met business, which also supplies the oil and gas market.
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Hide AdPressure Tech’s chief executive John Hayward said: “I think we can double the size of the business in the next five years. We’ll be taking on more people and we’re looking to expand the night shift.”
Roota currently employs 35 people and Pressure Tech has 250 staff.
The two brothers who run Roota, Matt and Nick Crampin, will stay on in their respective roles as managing director and production manager.
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Hide Ad“Roota has very good management and as part of the deal we wanted them to sign up to stay on,” said Mr Hayward.
“It’s a profitable business with good growth prospects. It ticks all the boxes. It was an easy decision to make the investment.
“Roota dovetails very nicely with Al-Met in that they’re both involved with the containment and control of gases and liquids under pressure. It operates in markets we know – oil and gas – and it uses manufacturing we know.”
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Hide AdPressure Tech, which counts the Royal Navy and the US Air Force among its customers, will use money left over from the fund-raising for working capital to expand the business.
Roota is a privately owned, 40-year-old business that specialises in bespoke engineered products. Pressure Tech will pay an initial £9m in cash with deferred payments of up to £4.5m depending on Roota’s future financial performance.
Pressure Tech said the deal will provide cross-selling opportunities between the two group’s customer bases.
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Hide Ad“There are things Roota can do and Al-Met can’t and vice versa, although the deal isn’t just about cross-selling. As a standalone business there is plenty to get at,” said Mr Hayward.
Pressure Tech said the deal should enhance earnings in the first year. In 2013 Roota reported revenues of £8.0m and a pre-tax profit of £2.6m. At the end of November it had net assets of £4.4m.
Roota is based in a purpose built factory just two miles away from Pressure Tech’s head office in Sheffield. Mr Hayward said the close proximity will help with its integration.
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Hide Ad“It has been our long-stated strategy to grow the group both organically and through acquisition,” he said.
“Roota gives us the opportunity to enhance our position in the specialist engineering supply chain to the oil and gas industry. Together with Al-Met, we will have two of the UK’s premier, niche component manufacturers respected for both their highly skilled workforce and customer service.”
Charles Stanley Securities placed 1,856,174 new ordinary shares of 5p each in the capital of the company at a price of 575p per new ordinary share. Some £10.7m was raised by the sale, which will be used to fund the initial £9m cash consideration.
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Hide AdIn addition, Charles Stanley placed a further 1,048,174 new ordinary shares at the placing price to raise a further £6.0m to boost working capital and fund capital expenditure.
Both lots of shares were placed with existing and new institutional investors.
BHP Corporate Finance acted as lead advisor to the shareholders of Roota while Hill Dickinson acted as their legal advisor.
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Hide AdHlw Keeble Hawson was the legal advisor to Pressure Technologies and PwC provided financial due diligence.
Don Gray, partner at BHP Corporate Finance, said: “Roota is an exceptionally high quality business and I am confident that Pressure Technologies will prove to be an excellent home for the business.
“This deal is further evidence of how Yorkshire’s engineering businesses are capitalising on the growing opportunities within the energy sector.
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Hide Ad“We are seeing an increasing number of our clients leveraging their world class skills on the global energy stage.”
Paul King, partner at Hill Dickinson, said: “The purchase by Pressure Technologies represents a great opportunity for everyone involved and I have no doubt that Roota will continue to flourish going forwards.”
Roger Dyson, head of the corporate business team at hlw Keeble Hawson, said: “The acquisition complements the strategic growth of Pressure Technologies with Roota now being an integral part of its wider AIM-listed, Sheffield based group of companies.”